1. KAZI NAZRUL UNIVERSITY
PRESENTATION ON-
INDEPENDENTDIRECTORSASPERCOMPANYACT-2013
&SOMEDISCUSSIONONEFFECTIVENESSOF
COMPANY ACT
IN
CORPORATE GOVERNANCE& BUSINESS ETHICS

2. 7. CONCLUSION
6. MANNERS OF APPOINTMENT OF ID
5. REMUNERATION & TENURE OF ID
4. SOME KEY CHANGES IN ID AS PER COMPANY ACT -2013
3. DEFINITION OF INDEPENDENT DIRECTOR AS PER COMPANY ACT -2013
2. A SHORT DISCUSSION ON CHANGING OF COMPANY ACT -1956
1. CONCEPT AND HISTORY OF COMPANY ACT - 2013

3. FROM WHERE THE COMPANY ACT-2013
CAME INTO EXISTANCE? (HISTORY OF CA-2013)
• The 1956 Act has been in need of a substantial revamp
for quite some time now, to make it more contemporary
and relevant to corporate, regulators and other
stakeholders in India.
• While several unsuccessful attempts have been made in
the past to revise the existing 1956 Act, there have been
quite a few changes in the administrative portion of the
1956 Act. The most recent attempt to revise the 1956 Act
was the Companies Bill, 2009 which was introduced in
the Lok Sabha, one of the two Houses of Parliament of
India, on 3 August 2009. This Companies Bill, 2009 was
referred to the Parliamentary Standing Committee on
Finance, which submitted its report on 31 August 2010
and was withdrawn after the introduction of the
Companies Bill, 2011.

4. CONTINUE..
• The Companies Bill, 2011 was also considered by the
Parliamentary Standing Committee on Finance which
submitted its report on 26 June 2012. Subsequently, the Bill
was considered and approved by the Lok Sabha on 18
December 2012 as the Companies Bill, 2012 (the Bill). The
Bill was then considered and approved by the Rajya Sabha
too on 8 August 2013. It received the President’s assent on
29 August 2013 and has now become the Companies Act,
2013.

5. 
A short discussion
WHAT IS THE BASIC NECESSITY OF CHANGE IN
COMPANY ACT??

6. • The term’ Independent Director’ has now been defined in the 2013
Act, along with several new requirements relating to their
appointment, role and responsibilities. Further some of these
requirements are not in line with the corresponding requirements
under the equity listing agreement [section 2(47), 149(5) of 2013
Act].
• Independence means free from outside control, not subject to
another’s authority. A man is said to be free if he is free from
obligations. Similarly in the limelight of Corporate Governance
Independent Directors are said to be free if they are free from the
control of the management. Independence from Management is a
vital factor for considering a director to be independent. This
concept of Independence of Directors is recognized now globally as it
is felt by the corporate experts and legislators after a spate of
scandals, that it improves Corporate Governance.
DEFINITION OF INDEPENDENT DIRECTOR UNDER
COMPANY ACT -2013 :-

7. • ► Maximum number of directors raised to 15 from 12
• ► Can be enhanced by special resolution without Central Government approval
• ► Atleast one director to be a resident director
• ► Atleast one women director by the prescribed class of Companies as stated in
the rules
• ► Every listed company within 1 year from commencement of the proviso
• ► Every other company with paid up capital of Rs 100 cr or more within 3 years
from commencement of
• the proviso
• ► Atleast one third of the board to comprise of Independent Director by
• ► Listed company ,
• ► Public Company having
• ► Turnover >= Rs 300 crore or
• ► Paid up share capital of >= Rs100 crore or
• ► O/s Loans / Borrowings / Deposits / Debentures > Rs 200 crore
SOME KEY CHANGES IN ‘INDEPENDENT DIRECTOR’
UNDER COMPANY ACT -2013 :-

8. An ID cannot be Independence if (as per Section 149(6)):-
• ► Present or past Promoter of
Company/Holding/Subsidiary/Associate
• ► Relative of promoter or director in the
Company/Holding/Subsidiary/Associate
• ► Pecuniary relationship with Company / Holding / Subsidiary /
Associate or their promoter/directors in last 2 years and current year
• ► Relative who has pecuniary relationship/transaction with
Company / Holding /Subsidiary / Associate or their
promoter/directors >=2% of gross turnover / Rs. 50lakhs (whichever
is lower) in last 2 years or current year
• ► Neither he nor his relatives is KMP in the company - or employee
of Company/Holding/Subsidiary/Associate in last 3 years
SOME KEY CHANGES IN ‘INDEPENDENT DIRECTOR’
UNDER COMPANY ACT -2013 :-
Continue…

9. • ► Neither he nor his relative is employee/proprietor/partner in
last 3 years in firm of auditors/company secretary in practice or
cost auditor of Company/Holding/Subsidiary/Associate
• ► Neither he nor his relative is employee/proprietor/partner in
last 3 years in legal or consultancy firm having transaction
>=10% of gross turnover of such firm
• ► A person who together with his relatives hold >=2% of voting
power of the company
• ► Nominee Director/Whole-time director
SOME KEY CHANGES IN ‘INDEPENDENT DIRECTOR’
UNDER COMPANY ACT -2013 :-
Continue..

10. Remuneration OF ID [Section-149(9)]:-
► Not be entitled to any stock options
► Sitting Fees max of Rs 1 lakh per meeting, reimbursement
of expenses
► Profit related commission as approved by BOD subject to
limits

11. TENURE [Section 149(10) and (11)] :-
• ► Term of 5 Consecutive years; Can be extended for
further 5 years by special resolution;
• ► Re-appointment only after a cooling period of 3 years
• ► Applies prospectively, i.e. current term will not be
counted
• ► Not liable for rotation- Sec 149(6)

12. MANNER OF APPOINTMENT OF ID:-
• The appointment of Independent Directors of the
company shall be approved at the meeting of the share
holders. In the Annual General Meeting (A.G.M) a notice
must be served for approving the appointment of
independent directors and such notice shall include a
statement in the opinion of the Board, that the
independent director proposed to be appointed fulfills
the conditions specified in the Act.

13. CONCLUSION:-
• The Satyam affair and other scandals abroad exposed the growing
need to ascertain precisely the standards for determining the liability
of independent directors for prevention and detection of fraud, in
view of the limited roles performed by them in the company. These
scandals taught the legislators and corporate experts in India and
abroad a costly lesson which propelled them to take adequate
measures.
• As regards India, the legislators after such collapses enacted the
new act which makes a considerable effort to bring the role of
independent director in line with the changing needs of the economy.
The primary objective behind the new act's provision on independent
directors is to ensure transparency and independence and at the
same time to bring value to the company by providing input on
strategy, business, marketing, legal, compliance and other matters
including performance of monitoring functions.

14. THANK YOU
MY RESPECTED TEACHERS
&
MY FRIENDS